In the joined appeals Lord Chancellor and another v McCloud and Others and Secretary of State for the Home Department and others v Sargeant and others, the Court of Appeal ruled in favour of the judges and firefighters who had been impacted by public sector pension reform. The Court of Appeal held that transitional arrangements that had been introduced to alleviate the impact of the reforms on older firefighters and judges were age discriminatory; the reforms protected older members while requiring younger members to transfer to a scheme with less valuable retirement benefits. These cases serve as a useful reminder that, in order to objectively justify a discriminatory policy or practice, employers must evidence the legitimate aim on which they rely. The Government identified a legitimate aim but failed to provide any evidence in support of it.
In March 2015, a new Judicial Pension Scheme was introduced, whereby all serving Judges were transferred onto a new, less generous scheme. Similarly, in April 2015, a new Firefighters’ pension scheme was introduced which was also less favourable.
Under both schemes, transitional provisions were introduced which meant that judges and firefighters who were within 10 to 14 years from retirement at the time the new schemes were introduced, were permitted to remain active members of the old schemes. Younger members were required to transfer to the new and less valuable scheme immediately.
Where an employer operates a directly age discriminatory policy or practice, the employer may escape liability if it can show that the policy or practice is objectively justifiable. In order to do this, the employer must show that it was a proportionate means of achieving a legitimate aim. Legitimate aims include, for example, encouraging loyalty or rewarding experience. To be proportionate, the benefit must outweigh the discriminatory effect of the policy or practice, and if there are two ways of achieving the same or similar aim, the least discriminatory option must be chosen. In this case, the Government argued, broadly, that the transitional provisions were justifiable as they sought to protect older firefighters and judges who were closer to retirement age as they had less time to adjust their financial planning and the transitional provisions encouraged consistency in public sector pension reform.
The cases were heard by the Employment Tribunal and Employment Appeals Tribunal. The Government appealed to the Court of Appeal and the two appeals were heard together.
The Court of Appeal dismissed both appeals, finding that the transitional provisions were unlawfully age discriminatory and resulted in undue hardship going beyond what was reasonably necessary in both cases.
It was recognised that the government had to be accorded some margin of discretion in relation to the legitimate aim on which it was seeking to rely but it was for the Employment Tribunal to decide whether the appropriate margin of discretion had been used. The Government asserted that its aim was to protect those closest to retirement but failed to show any evidence to support this aim and in fact the group the Government was seeking to protect was the least affected by the changes.
Where employers operate or seek to operate directly age discriminatory policies or practices, they must identify the social policy objective on which they wish to rely and ensure that they are able to present evidence to support the legitimacy of their asserted aim.